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Oil CEO Wages Immune to Price Slump as Shareholders Vote on Pay

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Article by Rakteem Katakey published 15 April 2015 by

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Ben van Beurden, Chief Executive Officer of Royal Dutch Shell Plc, pauses as the company announce their fourth-quarter results in London on Jan. 29. Photographer: Chris Ratcliffe/Bloomberg

Oil’s plunge has forced the world’s biggest energy producers to lay off workers and stall projects. Their chief executive officers have so far proved immune.

Royal Dutch Shell Plc, Europe’s biggest oil company, paid CEO Ben Van Beurden a total of $32.2 million last year, almost three times the amount his predecessor Peter Voser earned in 2013, according to data compiled by Bloomberg Intelligence. At BP Plc, where shareholders will vote on compensation at the annual general meeting on Thursday, CEO Bob Dudley’s total pay rose 4.9 percent to $15.4 million.

“The only people not hit by the drop in oil price are the CEOs running the companies,” said Gregory Elders, a London-based analyst at Bloomberg Intelligence. “BP may face irate shareholders again over climbing executive pay during its annual meeting this week.”

Shell’s net income has dropped in nine of the past 12 quarters and BP’s has fallen in six. Oil’s 50 percent decline in the past year has forced industrywide cutbacks and thousands of job losses, including at Shell and BP. The global industry may lose 50,000 to 100,000 jobs in the next six months, oil-services company Weatherford International Plc said Tuesday.

“The workers are paying a heavy price for the greed of those at the top,” said Tommy Campbell, a regional officer with the U.K.’s Unite trade union, which represents 8,000 North Sea workers. “It’s morally reprehensible.”

Pensions & Investment Research Consultants, which advises institutional shareholders and issues proxy vote recommendations, advised shareholders to reject Dudley’s pay at the April 16 meeting in London. His increase exceeds the company’s performance over the past five years, Pirc’s press officer Andrew Whiley said.

BP’s shares have declined in four of the past five years after an explosion at the Macondo well in the Gulf of Mexico in April 2010 resulted in the biggest oil spill in U.S. history, forcing the company to pay billions of dollars in fines. Shell’s have dropped in two of the past three years and are down 5 percent in 2015 in London trading.

“CEO renumeration is far outstripping shareholder returns,” Whiley said by phone. “There’s a growing concern about renumeration and that’s something that boards can’t ignore.”

At BP, the CEO’s earnings are about 50 times average employee pay, Whiley said.

BP’s press team didn’t immediately respond to an e-mail seeking comment.

“Shell’s executive compensation reflects delivery of our strategy, measured by both short-term and long-term targets,” the company said in a statement. “There is a clear alignment between the company’s performance and our compensation policies.”

Shareholders have been successful in forcing companies to cut executive pay before. In December, BG Group Plc watered down a record pay deal for incoming CEO Helge Lund following a backlash from shareholders including Legal & General Investment Management, the biggest investor in the U.K. stock market. Legal & General owns a 3.1 percent stake in Shell and in BP.

Richard King, a spokesman for Legal & General, declined to comment on how the company will vote at BP’s shareholder meeting this week.

Rex Tillerson, CEO of Exxon Mobil Corp., the world’s biggest oil company by market value, was paid $28.1 million in 2013, 30 percent less than in 2012, according to the latest data compiled by Bloomberg. John Watson, CEO of Chevron Corp., the world’s third-largest oil company, received $26 million last year, 8.3 percent higher than in 2013.

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